TheChek News Flow

Holding company’s move from Italy could tempt Fiat owners towards short-termism, writes Andrew Hill

John Elkann told reporters at this weekend’s meeting of Exor shareholders that the majority vote to move the Agnelli family holding company’s headquarters from Italy to the Netherlands, was not a symbolic choice, but a natural one.

But the chairman of Exor, which controls the carmaker Fiat Chrysler, was making a false distinction. The decision is both natural and symbolic.

Natural, because, since Fiat’s merger with Chrysler, the Agnelli family has controlled, through Exor, a genuinely global group. Core elements of the group have already moved to different locations, for different reasons: Fiat Chrysler itself is legally incorporated in the Netherlands and has fiscal residence in the UK, for instance. Mr Elkann — grandson of Gianni Agnelli, a global industrialist who nevertheless kept Fiat firmly in Italy — was right in saying that Exor is a “container” that is merely following its contents.

Yet it is disingenuous of him to imply that Exor’s departure is not also a symbol. The T in Fiat stands for “Torino”, after all, and Turin once was home to 100,000 Fiat workers, against the 5,000 currently employed there.

Over the years, Italians have often lamented the fact that hardly any Italian companies grow to have global significance. Fiat was one of the few, but it still came close to failure in the early years of this century. Exor, which also controls Ferrari, the US reinsurer PartnerRe, as well as holding a significant stake in The Economist, is indubitably stronger for its international reach.

Global significance, however, encourages less attractive global habits, one of which is the adoption of a certain useful rootlessness, for reasons of fiscal or operational efficiency. Multinationals grow distant from the places where they grew up and, as those ties weaken, their bosses and investors often succumb to the temptations of short-termism and expediency.

When the regional president of Piedmont, of which Turin is the capital, commented on the proposed Exor move in July, he pointed out how the decision increased the pressure for Turin to use its automotive heritage and expertise to become a “car city” without being “a Fiat city”. Compared with that task, moving headquarters from one jurisdiction to another is simple.

The true test of Mr Elkann’s long-running project to globalise the family business will be whether he and those working for him continue to channel a proportion of the benefits of Exor’s global resurgence back to its native land. Italian politicians have a duty to make Italy an attractive place to invest — a duty they have, in the past 25 years, too often shirked — but the heirs of Gianni Agnelli have a lasting responsibility to their homeland, too.

Link : http://www.rp-online.de/wirtschaft/unternehmen/bayer-aufsichtsrat-beraet-neues-angebot-fuer-monsanto-aid-1.6236331

Bayer Supervisory Board advises new listing for Monsanto

Leverkusen. In the bidding war the American seed company Monsanto is moving. On September 14, the Bayer Supervisory Board will discuss the status of negotiations and the further steps. Antje Höning

The learned from our editorial group circles. It should also be discussed about a possible higher offer and the possibility of a hostile takeover. For September 20, the Group held an investor and analyst meeting in Cologne. "Bayer expressed neither dates nor content of the Supervisory Board sessions," a Bayer spokesman.

The Leverkusen had submitted an initial offer for the controversial Genetic Engineering Group on May 23 and offered $ 122 per share Monsanto. The rejected Monsanto CEO Hugh Grant as well as too low from how on July 14 rose to $ 125 range. The merger of Bayer Crop Science division, which has its headquarters in Monheim, and Monsanto would with a turnover of 62 billion received largest agrochemical company in the world arise.

Informally follows talks in recent weeks continue

Markus Manns from Volksbanken fund Union Investment holds both for feasible - a higher offer and the threat of a hostile takeover, even if that was not previously Bayer style. "Bayer could make a hostile takeover bid start in the hope that the Monsanto management pivoted around and you just go to a common friendly solution," said the manager of our editors. For this, the Bayer AG could try to exert pressure by making direct approach to the Monsanto shareholders and tried this, the Monsanto board exchange part. Also conceivable is a higher offer. "Bayer has also the price is still room for improvement: Up to 135 dollars per share Bayer can go, then it will be too expensive and risky," said Mann. Therefore it is important that Bayer as the next step, get insight into the Monsanto-books.

Informal talks between the Germans and Americans in recent weeks have already gone further. Even Bayer CEO Werner Baumann and Bayer supervisory board chairman Werner Wenning were common in the US, in order to inspire the Monsanto management for the deal, as is stated in the consolidated circles continue. The aim was to put a powerful signal that the board fully stand behind the plans of the Office had come in May Board bosses.

In the Group and Supervisory you know that Bayer's pipeline of pharmaceutical innovations is not too full. If the current box office hits such as Xarelto lose patent protection, sight comes to nothing like it. Simultaneously Bayer is a global scale as a pharmaceutical company too small to be protected against a takeover. With Monsanto could make the agrochemical business to strong second leg against. Therefore, one is willing to the disadvantages of the merger - Monsanto has a bad reputation as Genpflanzen- and glyphosate manufacturers - to be accepted.

* New Vivendi deal triggers material Mediaset share price correction

A combination of the UK referendum vote and Vivendi’s decision to change its offer to buy Mediaset

Premium triggered a 23% correction in Mediaset Spa’s share price since 23rd June. However, Mediaset’s

FTA-TV assets in Italy and Spain continue to perform driven by strong H116 results (See our note here).

Meanwhile, the collapse of the Vivendi deal may create an option for Sky to reopen discussions with

Mediaset to consolidate Italian pay-TV, potentially unlocking value within Sky Italia. We note Wall Street

Italia on 3/8/16 raised the prospects of SKY-Mediaset renewing talks.

* Five possible outcomes for Italian pay-TV market exist

1) Mediaset re-takes control of Premium and loses Champions League (CL) rights at the next auction.

Mediaset funds c€200m of cumulative losses to break-even. 2) Mediaset re-takes control of Premium

and renews CL rights (c15% premium). Mediaset funds €240m of cumulative losses. 3) Sky acquires

100% of Mediaset premium outright which could generate synergies €1.3-2.7bn (assuming 10-20%

SG&A cost out). 4) Sky and Mediaset create a JV which controls all of Sky Italia and Mediaset Premium

assets; and 5) Mediaset reaches a revised agreement with Vivendi or sells to a another party.

* We think a Sky deal has benefits

FINinvest would benefit from a Sky deal via: 1) unlocking Premium value; 2) higher dividends; and, 3)

share in upside (assuming JV or equity deal with Sky). For Sky, a deal would de-risk execution, generate

synergies and unlock value; although UBS base case sees Sky Italia deliver EBIT growth without a deal.

While regulatory hurdles are likely, we view the characteristics of the Italian market makes merger

approval feasible. Timing could be influenced by the upcoming CL rights auction in spring-summer 2017.

* Valuation: Reiterate Buy Rating on Mediaset Spa and Sky

Our DCF valuation of Mediaset Premium, assuming no renewal of CL, is -€150m. Under this scenario our

Mediaset SOTP valuation would be €3.63 implying 27% upside. Our SOTP would however increase to

€4.16-4.53 assuming a sale or JV with Sky. For Sky, we view the share price reflects limited value for Italy

while growth from new initiatives (Sky Q, UK mobile launch, pan-European OTT launch) has been

underestimated. Sky trades 12.5x calendarised 2017E EPS – a trough multiple vs. a FY17-22E EPS CAGR

of 20%.

Zodiac issued a PW on Friday after market close. Full year sales are in line with previous

expectations – implying organic revenue growth in Q4. However, FY16 operating profit

is expected to be around 10% below cons. expectations of €302-303m. We estimate

that the circa €30m lower profits could be explained as: a) two thirds from higher

provisions related to settlements; b) one third due to weakness in the helicopter market

OE and AM. Furthermore Zodiac expects to satisfy the Net Debt/ Adj. EBITDA <3x

covenant for the full year implying, we believe, significant progress on improving cash

generation driven by working capital relief in Q4. Management confirms ZC is on its

trajectory of progress towards full operating recovery in Interiors by the end of 2017.

Two articles published on Friday in Les Echos and L'Usine Novelle suggest: 1) Zodiac

delivered its 64th A350 lavatory set implying good progress on the A350 production line

with only 6 sets still to deliver (UBSe) to meet Airbus' 50 a/c delivery target for 2016;

Current management attention is focused on the ramp up to 70 a/c delivery for 2017.

2) ZC opened up 7 factories to the press and the conclusions are aligned with the

company's guidance – while operational progress can be observed there is still work to

be done in our view until a return to full operating performance.

While the initial market reaction to a new PW may be negative, we believe it should be

mitigated by: 1) ZC's underperformance vs. aerospace peers of 18% since the UK Leave

vote, and 11% since Q3 Sales; 2) profit miss is driven mainly by settlement provisions

while Zodiac is making good progress on operational improvements, 3) implied

improving cash generation in H2, 4) ex provisions we calculate H2 margin of 7.9%, not

far vs. FY 17 expectations (UBSe 8.5%, cons 8.8%). We expect ZC to provide more

granularity and offer guidance/indications on FY 2017 profits on 14th Sept.

Our €19.5 DCF price target is based on 9% WACC, 5-year profit growth of 20.5%

CAGR from FY15/16E and cash conversion of 82%, which implies a fair value multiple

of 22x FY15/16E EV/EBITA.